International district heating approaches as a model for Germany

01.08.2025

Source: E & M powernews

The Institute of Energy Economics at the University of Cologne has analyzed regulatory concepts for heating networks in other countries. The EWI identified a need for reform in Germany.

In order to achieve the European and national climate targets, a climate-neutral heat supply is essential in Germany. In addition to decentralized solutions such as heat pumps, heating networks play a central role. A recent study by the Institute of Energy Economics at the University of Cologne (EWI) looks at the regulatory framework for their decarbonization.

The analysis focuses on international regulatory approaches from Denmark, Sweden and the Netherlands. According to the EWI, the aim is to derive impulses for the further development of the German regulatory framework from the experience gained there.

Different international approaches

The study shows that the countries examined differ greatly in their district heating strategies:

• Sweden pursues a market-based approach. The focus there is on transparency obligations for suppliers and individual negotiation rights for households.
• Denmark, on the other hand, relies on a heavily regulated non-profit model, which is combined with indicative price caps and binding municipal heating planning.
• In the Netherlands, the district heating sector is currently undergoing radical change. Municipalities are being given more control powers, while the previously applicable natural gas reference price is gradually being replaced by cost-plus regulation (costs plus a conceded margin).

EWI: Insufficient framework in Germany

In the view of the EWI, the current regulatory framework in Germany appears inadequate in view of the challenges posed by the expansion and decarbonization of heating networks. However, according to the study, the upcoming amendment to the District Heating Ordinance ("Ordinance on General Conditions for the Supply of District Heating", AVBFernwärmeV) could be used as an opportunity to take up approaches from abroad.

For example, more binding heat planning instruments, such as those that exist in Denmark and the Netherlands, could also be used in Germany. The transparent pricing practiced in Sweden is also cited as a positive example. Indicative price caps - as exist in Denmark, for example - could create investment security, but would also pose administrative challenges, according to the EMI.

Sensitive topic of compulsory connection

Another central topic of the study is: How can an obligation to connect and use district heating in Germany be legally and practically structured without jeopardizing social acceptance?
According to the EWI, a model like the one in Denmark, which links the obligation to connect to municipal heating planning and relaxes it in the event of high consumer prices, would not only require legal changes. It would also require significantly more transparency in pricing and the establishment of an independent price supervisory authority. Due to the effort involved, alternatives should also be examined, according to the study.

One possible approach is the Dutch model, in which municipalities can designate heating network areas when the Heating Act (Wcv) comes into force. In these areas, owners receive a binding connection offer that can only be rejected under certain conditions.

Amendment of the Heat Supply Ordinance is also pending

Despite existing funding instruments, there are uncertainties regarding the long-term economic viability of district heating projects, according to the EWI. It is therefore all the more important to shape the regulatory framework in such a way that investment security exists, market transparency is guaranteed and consumer acceptance increases.

The EWI recognizes the conflicting goals of transparency, refinancing and bureaucracy. In addition to the District Heating Ordinance, other regulations are crucial, such as the legally binding nature of municipal heating plans, the amendment to the Heat Supply Ordinance (WärmeLV) and dealing with the dismantling of existing gas grids.

According to EWI, the transformation of the district heating supply can only succeed if the regulatory framework is clear, reliable and practicable. Only then can the expansion be driven forward efficiently without creating new legal uncertainties or bureaucratic hurdles. International regulatory approaches could serve as a guide here - but would have to be adapted to German circumstances.

The EWI study on the expansion of heating networks is available to download as a PDF.

Author: Susanne Harmsen